Retail Properties of America (RPAI) sold a long-struggling retail, residential and office center in Salt Lake City and closed the real estate investment trust’s existing $94 million mortgage on the property.
The suburban Chicago-based company sold the 623,205 sq ft Gateway Center in full satisfaction of its $94.4 million mortgage debt. The mortgage had an interest rate of 6.57 percent and the company expects to extinguish the debt in the first quarter of 2016.
Vestar announced Tuesday that the company purchased the center in a joint venture with Oaktree Capital Management and plans to invest $30 million in revitalizing the center.
The sale comes after the value of the loan dropped significantly due to tenants moving to the newer City Creek Center mall, according to Moody’s Investor Services. The loan was transferred to the Special Servicer “due to imminent default” in August, when occupancy had fallen to 76 percent down from 96 percent at securitization. RPAI then wrote the loan down from $94.4 million to $75 million.
The Gateway, at the intersection of 400 West and South Temple in downtown Salt Lake City, is leased to more than 100 regional and national retailers, including Dick’s Sporting Goods, Gateway Theaters, and Barnes & Noble. But the mall, built in 2001, has faced intense competition from the newer (2012) City Creek Center, losing important tenants, including the only Apple store in Salt Lake City.
David Larcher, president of Vestar, said in prepared remarks that Salt Lake City is undergoing a dramatic transformation, rapidly attracting millennials and entrepreneurial firms in technology and finance.
RPAI is one of the largest owners and operators of shopping centers in the US, with 201 retail operating properties as of September 30, 2015, while Phoenix-based Vestar owns about 45 shopping centers across Arizona, California, Texas and several nearby states, according to the companies’ websites.